Employers will have to pay national insurance on staff pension contributions under a measure to be announced by Chancellor Rachel Reeve in next week’s Budget, according to reports today.
The Times said that the new levy will generate more than £15 billion in extra tax revenue, but controversially will not apply to public sector workers.
Public sector pensions, which generally are based on final salaries and index-linked, are already considered the gold standard for people retiring, with these ‘defined benefit’ schemes now all but non-existent in the private sector.
Instead, private sector employees receive employer contributions into a pension pot that can be used to buy an annuity on retirement, but its size depends on how much is put in and how well the assets where that money has been invested have performed.
According to the Times, public sector organisations such as the NHS and Civil Service will have their contributions reimbursed, a move estimated to cost the Chancellor £5 billion.
The Tories claim that any move to change National Insurance contributions would be in direct contradiction of the promises Labour made in its election manifesto, but PM Keir Starmer has said that pledge only applied to workers and not employers.
Reeves today was forecast next week to unveil £35 billion worth of tax hikes over the next five years by Bank of America.
This would be on top of £22 billion of new borrowing and be part of what Bank of America analysts expect to be a £57 billion package of public spending.